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growth of the organization making this presentation, industry growth or other trend projections and any estimated company earnings are or may be forward looking statements and as such involve risks and uncertainties. Actual results and developments may differ materially from those expressed or implied by these statements depending on a variety of factors.

This material is presented by NASDAQ who make no representation or warranty regarding the accuracy or liability or completeness of any information provided and any reliance you place on such information will be at your sole risk.

CHAIRMAN'S STATEMENTI am pleased to present the Company's Annual Report for the year ended 31 March 2017.

The year saw a significant level of new funds raised by the Company and a fair amount of investment activity as the task of employing the new funds got underway, along with several realisations from some of the existing investments.

Net asset value and resultsAs at 31 March 2017, the net asset value per share ("NAV") stood at 90.4p, an increase of 2.3p (2.4%) after adding back dividends of 6.0p per share which were paid during the year.

The Income Statement shows a return attributable to equity shareholders for the year of £2.3 million comprising a revenue loss of £12,000 and a capital return of £2.3 million.

FundraisingThe Company launched an Offer for Subscription in December 2015, which closed on 30 September 2016. The offer raised total gross proceeds of £19.3 million, which provides the Company with a significant level of new funds and allows it to participate in attractive new investment opportunities as they arise.

Investment activity and performanceAt the year end, the Company held a portfolio of 90 investments. Of these, 31 are either quoted on AIM or the NEX Exchange Growth Market and have a value of £24.5 million (28% of the portfolio). The 59 unquoted investments have a value of £61.9 million and represent 72% of the portfolio.

Two new quoted investments were made at a total cost of £427,000. There were three quoted investment disposals generating proceeds of £656,000.

In the unquoted portfolio, there were 19 realisations, producing proceeds of £9.0 million and realised gains of £524,000. One follow-on investment was made at a cost of £1.6 million and 14 new investments at £25.8 million.

The quoted portfolio showed net unrealised gains of £840,000 over the year. At the year end, the Board reviewed the valuations of the unquoted investments and made a number of adjustments. Overall the unquoted portfolio showed total unrealised gains of £1.2 million for the year. Net unrealised gains for the full portfolio were therefore £2.1 million.

Further details on the investment activity are included in the Investment Adviser's Report.

DividendsThe Company has a policy of seeking to pay annual dividends of at least 4% of net assets per annum.

In view of the level of realisations achieved in the period, the Board is proposing a final dividend of 4.5p per share to be paid on 18 August 2017, subject to Shareholder approval at the forthcoming AGM, to Shareholders on the register at 21 July 2017. This will bring total dividends in respect of the year ended 31 March 2017 to 7.5p per share, which represents a yield based on opening NAV of 8.0% pa.

Shareholders are reminded that the Company operates a Dividend Reinvestment Scheme for those investors that wish to reinvest their dividends and obtain further income tax relief on the reinvested dividend. A Dividend Reinvestment Form is available on Downing's website or further information can be obtained by contacting Downing.

Share buybacksThe Company continues to operate a policy of buying in its own shares that become available in the market at a 5% discount to NAV (subject to liquidity and any regulatory restrictions).

During the year, the Company purchased 2.8 million shares at an average price of 87.2p per share. Overall, the total cash returned to shareholders via share buybacks and this year's total dividend of 7.5p per share is approximately equal to the level of cash proceeds received during the year.

The Company retains Panmure Gordon as its corporate broker to assist in operating the share buyback process and ensuring that the quoted spread on the Company's shares remains at a reasonable level.

DirectorateAs reported in the Half Yearly Report, two Directors, Helen Sinclair and Andrew Griffiths, resigned during the year. I would like to once again thank Helen and Andrew for their contributions as non-executive directors since the major merger in 2013 which created Downing ONE. My colleagues and I wish them every success in their other ventures.

Now that the original six VCTs that were merged together have been successfully integrated into one Company, the Directors believe that a Board comprising three non-executive directors is appropriate for the Company at the current time and therefore do not propose to make any new appointments for the time being.

Fundraising plansThe Company did not launch a new fundraising for the 2016/17 tax year, partly because it had raised significant funds in the prior tax year which were still in the process of being invested. Progress is now being made in investing those funds and the Board has therefore decided to consider undertaking a new Offer for Subscription for the 2017/18 tax year. If the Board decides to proceed full details will be sent to Shareholders as they become available.

In order to give the Company flexibility to launch this new offer without having to incur the expense of issuing a separate Shareholder circular, resolutions will be proposed at the forthcoming AGM to give the Directors authority to allot and waive pre-exemption rights on up to approximately £35 million worth of new shares.

Annual General MeetingThe Company's next Annual General Meeting ("AGM") will be held at Downing LLP, Fifth Floor, Ergon House, Horseferry Road, London, SW1P 2AL at 10.30 a.m. on 15 August 2017.

Three items of special business are proposed at the AGM: - two in respect of the allotment of shares as described above; and- one in respect of the authority to buy back shares as noted above.

OutlookThe new VCT regulations continue to provide challenges for the Investment Adviser in both securing and structuring new investments and in supporting existing portfolio companies. In particular, the new rules heavily restrict opportunities to invest in AIM-quoted companies. The Company does however continue to hold a substantial portfolio of AIM-quoted investments so can continue to benefit from that for the time being.

Since the year end, the Company has made a £5 million non-qualifying investment into the Downing Micro-Cap Strategic Trust plc, a new Investment Trust managed by the same team that advises the Company on its AIM-quoted portfolio. As an Investment Trust, this is one of the few types of non-qualifying investments now permitted under the VCT regulations and will provide the Company with liquidity and the possibilities of some growth on funds that would otherwise be held as cash while awaiting investment in new VCT qualifying opportunities. For the avoidance of doubt, the Board has obtained agreement from the Advisor that there will be no "double charging" of fees.

Over the next year, we expect to see the more recent investments develop businesses that have the potential to drive steady performance of the Company in the future. At the same time, the Adviser will be exploring realisation opportunities for the more mature investments, although, as ever, will only pursue exits if they consider the price and timing to be appropriate.

I look forward to meeting Shareholders at the AGM and to reporting developments in my statement with the Half Year Report to 30 September 2017.

Chris KayChairman

INVESTMENT ADVISER'S REPORT IntroductionThe following is a review of the performance of both the quoted and unquoted investment portfolios.

At 31 March 2017, the Company held a portfolio of investments in 90 quoted and unquoted companies, valued in total at £86.4 million.

Net asset value and resultsThe net asset value per Share ("NAV") at 31 March 2017 stood at 90.4p, compared to the NAV at 31 March 2016 of 94.1p. Total Return (NAV plus cumulative dividends paid since the merger in 2013) is 108.4p.

The return on ordinary activities after taxation for the year was £2.3 million, comprising a revenue loss of £12,000 and a capital profit of £2.3 million.

Unquoted Venture Capital investmentsInvestment activityAt 31 March 2017, the unquoted portfolio was valued at £61.9 million, comprising 59 investments, spread across a number of sectors.

During the period, there were 14 new investments totalling £25.8 million and one follow-on investment totalling £1.6 million. The new investments were as follows:

£2.5 million was invested in Vectis Alpha Limited which is seeking to build and develop infrastructure opportunities.

£700,000 was invested in Avid Technology Group Limited, a manufacturer of electrified ancillaries for internal combustion engines.

Brownfields Trading Limited is seeking to develop small scale waste disposal projects and £2.5 million has been invested in this company.

£2.5 million was invested in Yamuna Renewables Limited, which is seeking investment opportunities in the wood refinery sector.

Jito Trading Limited, Morava Limited and Rhodes Solutions Limited are all exploring opportunities in the wood refinery sector. £2.5 million was invested into each company. After the year end Morava was wound up in order to free up cash for other investments.

£1.5 million was invested into Pantheon Trading Limited which is seeking to develop and operate roof mounted PV systems in Cyprus.

£920,000 was invested into both Ironhide Generation Limited and Indigo Generation Limited. £738,000 was invested in Rockhopper Renewables Limited and £422,000 in SF Renewables (Solar) Limited which are in the process of acquiring land in India to build and operate 15MW ground mounted solar arrays.

One non-qualifying investment of £5 million was made into DoneLoans Limited, an investment company which makes secured loans.

£600,000 was invested into Xupes Limited, a pre-owned luxury e-commerce business based in Bishops Stortford, specialising in watches, handbags, jewellery and antiques.

A further £1.6 million was invested into Pilgrim Trading Limited which will be converting two vacant properties in London into children's day nurseries.

Realisations of investments in the year generated proceeds of £9.0 million and total profits over holding value of £524,000 from 15 full exits, and 4 partial exits. A summary of the most significant realisations is shown below:

A further distribution of £195,000 was received from the refinancing of Quadrate Catering Limited in the prior year, generating an additional profit of £161,000.

Tramps Night Club Limited, the owner of a night club in the West Midlands, has started repaying the loan notes under a refinancing arrangement. A total of £427,000 was received during the year at a profit over carrying value of £221,000.

Gatewales Limited holds rights to profit shares from a development project. The project is performing in line with plans and the profit shares are now being paid out, with £151,000 received in the year.

Kidspace Adventures Holdings Limited, which owns three well established children's play areas in Croydon, Romford and Epsom, was sold and generated proceeds of £2.8 million, being £210,000 in excess of original cost.

Two non-qualifying loans were repaid in full in the year, being Hobblers Heath Limited and Kidspace Adventures Limited, which repaid a total of £1.2 million.

Deferred consideration totalling £30,000 was received from Kilmarnock Monkey Bar Limited and Liverpool Nurseries (Holdings) Limited, both of which were sold in prior years.

Unquoted Venture Capital investmentsCedarville Limited was established with the intention of developing and operating garden centres in the UK. Morava Limited was incorporated to build and develop biomass boilers in the wood refinery sector. Following a lack of suitable investment opportunities for either company, both investments were repaid in full generating total cash of £3.5 million for deployment in other qualifying prospective investments.

Redmed Limited paid final distributions of £36,000, generating a loss of £28,000 compared to holding value.

Portfolio valuation There have been a number of valuation movements in the unquoted portfolio during the year with an overall value uplift of £1.2 million. The most significant value movements are shown below.

Leytonstone Pub Limited owns and operates The Red Lion pub in Leytonstone and continues to trade well. An independent valuation also demonstrated strong growth in the underlying property value, and these two factors combined to generate a further uplift in value of £750,000.

Pearce & Saunders Limited, is a small pub group with a portfolio of three pubs in the London area. These have similarly benefitted from the continued increase in property prices across the capital, resulting in an uplift in value of £475,000 (now held at cost).

Cadbury House Holdings Limited was uplifted by £200,000 during the year. The company owns and operates a health club, restaurant and conference centre near Bristol which continues to perform well.

Fenkle Street LLP, is a property development company that purchased a building in Newcastle and converted it into a hotel. The hotel is trading well and the valuation has been uplifted by £141,000 to reflect this.

Kimbolton Lodge Limited, the elderly care home in Bedford, was valued up £141,000 and is reflective of sustained levels of good occupancy.

Tramps Night Club Limited the owner of a night club in the West Midlands, has increased in value by £171,000 following a refinancing agreement made during the year and the ongoing repayment of the loan.

Unfortunately significant write downs were also required against three investments in the period.

Oak Grove Renewables Limited, an anaerobic digestion plant in Norfolk has been reduced in value by £284,000, due to continued performance issues at the facility.

Curo Compensation Limited offers a 'software as a service' solution to blue chip companies to manage their annual staff compensation process. The company is seeking further funding in 2017 to support its growth and ongoing development. The share price of this new round has been taken in to consideration when valuing the Downing ONE holding and, as such, the year-end value has been reduced by £235,000.

Mosaic Spa and Health Club Limited continues to progress an exit strategy. The valuation has been adjusted down by £260,000 at the year end to reflect the anticipated final proceeds.

Other smaller valuation adjustments totalled to a net gain of £147,000 over the year.

Quoted investmentsInvestment activityAs at 31 March 2017, the quoted portfolio was valued at £24.5 million comprising of 31 holdings. Over 13% of the quoted portfolio is accounted for in the top 10 holdings, reflective of the focused investment management approach that the Manager deploys.

Over the year to 31 March 2017, the valuation of the quoted portfolio (taking into account realised and unrealised movements) has risen by over 3%, behind the main AIM indices over the same period which experienced gains of up to 30%. The predominant reason for this underperformance is stock-specific within the underlying portfolio, and also due to the fact that the Company does not invest in mining and extraction companies or mainstream IPOs, both of which experienced a buoyant period for share price rises.

The quoted portfolio saw relatively little change in the year. Two partial and one full disposal were made, realising gains (versus cost) of £79,000. There were two new quoted holdings in the year, the largest being an investment of £377,000 into SysGroup plc.

Portfolio MovementsThe main positive contributors to performance were Craneware Plc, the market leader in Value Cycle solutions for the US healthcare market, which contributed £867,000 of unrealised gains. The Company experienced strong trading and exceeded market expectations.

Science in Sport plc, the leading sports nutrition company that develops, manufactures and markets sports nutrition products for professional athletes and sports enthusiasts ("SIS") continued its growth trajectory and booked another solid year of top-line growth, growing turnover by 30% in the year. This, combined with the announcement that they are suppliers of products to the Olympic US Cycling team, helped buoy the share price. SIS contributed £749,000 of unrealised gains to the portfolio.

Amino Technologies plc, the global provider of digital TV entertainment and cloud solutions to network operators, experienced an unrealised gain of £469,000 in the portfolio. This was due to positive trading announcements following a year of difficulty integrating the Entone acquisition. The share price reflected the confidence that the management team now have in the combined business.

Meanwhile, on the negative, Inland Homes plc, a housebuilder with a specialist expertise in the acquisition and regeneration of brownfield sites, has reduced in value by £679,000, reflecting caution on UK housebuilding post Brexit and the fact that 23 legal completions were deferred following financial difficulties with one of their contractors. This meant that earnings would fall into 2017. There have been a number of announcements on planning consents and new builds since then which underpin our estimate of the Net Asset Value of this company.

Tracsis plc, leading provider of software and technology led products and services for the traffic data and transportation industry was also a negative contributor to performance, experiencing £655,000 of losses in the portfolio. This was due to caution that the full year results to the end of June 2017 would be heavily second half weighted; which the stock market viewed as a potential looming profits warning. We engaged with management and believe that although there were some short term and quantifiable challenges in the first half, that the longer term prospects of the company remain intact.

Angle plc, the specialist medtech company focusing on cancer related solutions saw some profit taking in its shares. The company initiated two 200 patient clinical studies in Europe and the US for the Company's first clinical application for detection of ovarian cancer in women. Interim evaluations of the first 50 patients in both studies have been positive. The company is still loss making, however is adequately funded for the medium term.

Generally we are confident of the longer term prospects for the Quoted Portfolio.

OutlookThere has been significant unquoted investment activity in the period in a number of sectors, including several smaller, higher risk and earlier stage investments. The focus is now on supporting these businesses to achieve growth over the next few years whilst also pursuing appropriate exit strategies for the more mature investments.

The portfolio as a whole is well spread across a large number of investments and remains relatively stable however, we believe upside potential remains.

Downing LLP

REVIEW OF INVESTMENTS

Portfolio of investmentsThe following investments, all of which are incorporated in England and Wales, were held at 31 March 2017:

Cost

Valuation

Valuationmovementin year

% ofportfolioby value

Total invested by Funds also managed by Downing LLP (1)

£'000

£'000

£'000

£'000

Top ten venture capital investments

Vulcan Renewables Limited

5,030

5,548

-

6.0%

5,839

DoneLoans Limited

5,000

5,000

-

5.4%

-

Downing Care Homes Holdings Limited

3,881

4,250

-

4.6%

-

Tracsis plc *

1,443

3,198

(655)

3.5%

2,845

Cadbury House Holdings Limited

3,081

3,075

200

3.3%

1,613

Baron House Developments LLP

2,695

2,695

-

2.9%

2,055

Leytonstone Pub Limited

1,061

2,650

750

2.9%

-

Pilgrim Trading Limited

2,594

2,594

-

2.8%

3,072

Brownfields Trading Limited

2,500

2,500

-

2.7%

2,500

Jito Trading Limited

2,500

2,500

-

2.7%

2,500

29,785

34,010

295

36.8%

20,424

Other venture capital investments

Rhodes Solutions Limited

2,500

2,500

-

2.7%

2,500

Vectis Alpha Limited

2,500

2,500

-

2.7%

2,500

Yamuna Renewables Limited

2,500

2,500

-

2.7%

2,500

Universe Group plc *

1,586

2,349

(212)

2.6%

2,476

Craneware plc*

850

2,201

867

2.4%

2,736

Anpario plc*

1,448

1,886

340

2.1%

3,174

Inland Homes plc*

1,526

1,786

(679)

1.9%

2,357

Science in Sport plc*

1,239

1,734

749

1.9%

4,306

Mosaic Spa and Health Club Limited

2,747

1,570

(260)

1.7%

2,337

Plastics Capital plc*

849

1,528

310

1.7%

2,447

Pantheon Trading Limited

1,500

1,500

-

1.6%

-

Quadrate Catering Limited

1,500

1,500

-

1.6%

2,300

Quadrate Spa Limited

1,872

1,500

-

1.6%

2,300

Harrogate Street LLP

1,400

1,400

-

1.5%

-

Pearce & Saunders Limited

1,320

1,320

475

1.4%

1,680

Nomansland Biogas Limited

1,300

1,300

-

1.4%

4,374

Finsbury Food Group plc*

655

1,165

(100)

1.3%

2,858

Amino Technologies plc*

700

1,061

469

1.2%

4,453

Vianet Group plc*

952

936

(41)

1.0%

-

Indigo Generation Limited

920

920

-

1.0%

5,880

Ironhide Generation Limited

920

920

-

1.0%

3,880

Redhall Group plc*

500

900

225

1.0%

1,620

Pittards plc*

1,350

889

113

1.0%

1,379

Pabulum Pubs Limited

807

844

8

0.9%

915

Cohort plc*

394

822

86

0.9%

-

Oak Grove Renewables Limited

1,365

781

(284)

0.8%

6,774

Data Centre Response Limited

557

764

62

0.8%

-

Fenkle Street LLP

346

764

141

0.8%

1,660

Ludorum plc

3,573

750

-

0.8%

110

Rockhopper Renewables Limited

738

738

-

0.8%

3,819

Avid Technology Group Limited

700

700

-

0.8%

-

Gara Rock Resort Limited

672

672

-

0.7%

4,354

Sprue Aegis plc*

545

637

(292)

0.7%

2,379

Kimbolton Lodge Limited

664

604

141

0.7%

-

Wickham Solar Limited

472

600

50

0.7%

6,637

Xupes Limited

600

600

-

0.7%

200

Tramps Night Club Limited

849

523

171

0.6%

-

Curo Compensation Limited

688

453

(235)

0.5%

430

SF Renewables (Solar) Limited

422

422

-

0.5%

6,778

Angle plc*

678

418

(276)

0.5%

-

Fresh Green Power Limited

400

400

-

0.4%

600

Pennant International Group plc*

335

386

248

0.4%

1,638

Sanderson Group plc*

336

381

(25)

0.4%

2,038

Augusta Pub Company Limited

290

349

25

0.4%

5,005

Brooks Macdonald Group plc*

257

340

31

0.4%

1,446

Norman Broadbent plc*

906

301

-

0.3%

752

Dillistone Group plc*

411

298

(3)

0.3%

-

Brady Public Limited Company*

272

296

83

0.3%

-

SysGroup plc*

377

289

(89)

0.3%

588

Hoole Hall Country Club Holdings Limited

2,316

250

-

0.3%

-

City Falkirk Limited

326

236

-

0.3%

1,062

FCT No.1 Limited

228

228

-

0.2%

448

Fubar Stirling Limited

357

225

-

0.2%

1,014

Green Energy Production UK Limited

200

200

-

0.2%

300

Hornby plc*

500

159

(9)

0.2%

1,514

Avacta Group plc*

168

114

(99)

0.1%

-

London City Shopping Centre Limited

110

110

-

0.1%

429

Pressure Technologies plc*

249

103

(3)

0.1%

-

Pro-Global Insurance Solutions plc*

61

100

-

0.1%

-

Gatewales Limited

71

98

2

0.1%

426

Frontier IP Group plc*

30

95

39

0.1%

-

Pearce & Saunders DevCo Limited

88

88

-

0.1%

112

Giving Limited

83

83

-

0.1%

-

Leytonstone Pub No1 Limited

81

81

-

0.1%

-

Flowgroup plc*

385

77

(212)

0.1%

-

MI Downing UK Micro-Cap Growth Fund B*

50

50

-

0.1%

Mi-Pay Group plc (Aimshell)*

136

41

(26)

0.0%

-

Wheelsure Holdings plc**

48

30

-

0.0%

-

Cheers Dumbarton Limited

64

22

-

0.0%

101

Future Biogas (Reepham Rd) Limited

427

-

-

0.0%

-

Top Ten Holdings plc

399

-

-

0.0%

-

Future Biogas (SF) Limited

320

-

-

0.0%

-

Hoole Hall Spa and Leisure Club Limited

297

-

-

0.0%

-

The Thames Club Limited

175

-

-

0.0%

-

China Food Company plc

149

-

-

0.0%

-

Resource Reserve Recovery Limited

6

-

-

0.0%

Commercial Street Hotel Limited

-

-

-

0.0%

-

Antelope Pub No 1 Limited

-

-

-

0.0%

-

The 3D Pub Co Limited

-

-

-

0.0%

-

57,612

52,387

1,790

56.9%

109,586

Total investments

87,397

86,397

2,085

93.7%

130,010

Cash at bank and in hand

5,523

6.3%

91,920

100.0%

The Company also invested into Heyford Homes VCT Limited, Imagelinx plc, Invocas Group plc, Lochrise Limited, and Antelope Pub no 1 Limited. These investments were acquired at negligible value and continued to be valued at the same level.

All venture capital investments are unquoted unless otherwise stated.

* Quoted on AIM ** Quoted on the NEX Exchange Growth Market

(1) Other funds also managed by Downing LLP as Investment Manager or Adviser as at 31 March 2017:

Directors' responsibilities statementThe Directors are responsible for preparing the Strategic Report, the Report of the Directors, the Directors' Remuneration Report, the separate Corporate Governance Statement and the financial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the annual report includes information required by the Listing Rules of the Financial Conduct Authority.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and Republic ofIreland (FRS 102). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

- select suitable accounting policies and then apply them consistently;- make judgments and accounting estimates that are reasonable and prudent;- state whether the financial statements have been prepared in accordance with applicable UK Accounting Standards, subject to any material departures disclosed and explained in the financial statements; and- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and to disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements and the Directors Remuneration Report comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In addition, each of the Directors considers that the Annual Report, taken as a whole, is fair, balanced and undertakes and provides the information necessary to assess the Company's position, performance, business model and strategy.

INCOME STATEMENTfor the year ended 31 March 2017

Year ended 31 March 2017

Year ended 31 March 2016

Revenue

Capital

Total

Revenue

Capital

Total

£'000

£'000

£'000

£'000

£'000

£'000

Income

1,736

209

1,945

2,790

-

2,790

Gains on investments

-

2,737

2,737

-

2,242

2,242

1,736

2,946

4,682

2,790

2,242

5,032

Investment management fees

(875)

(875)

(1,750)

(756)

(756)

(1,512)

Other expenses

(652)

-

(652)

(928)

-

(928)

Return on ordinary activities before tax

209

2,071

2,280

1,106

1,486

2,592

Tax on total comprehensive income and ordinary activities

(221)

221

-

(227)

227

-

Return attributable to equity shareholders

(12)

2,292

2,280

879

1,713

2,592

Basic and diluted return per share

-

2.3p

2.3p

1.0p

2.0p

3.0p

The total column within the Income Statement represents the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS 102"). There are no other items of comprehensive income. The supplementary revenue and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in November 2014 by the Association of Investment Companies ("AIC SORP").

STATEMENT OF CHANGES IN EQUITYfor the year ended 31 March 2017

Called up Share Capital

Capital redemptionreserve

Sharepremium account

Funds held in respect of shares not yet allotted

Specialreserve

Capitalreserve-realised

Revaluationreserve

Revenuereserve

Total

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

For the year ended 31 March 2017

At 1 April 2016

932

1,525

2,792

4,423

86,483

-

(4,680)

633

92,108

Total comprehensive income

-

-

-

-

-

207

2,085

(12)

2,280

Realisation of revaluations from previous years*

-

-

-

-

-

(1,593)

1,593

-

-

Transfer between reserves*

-

-

-

-

(6,716)

6,716

-

-

-

Transactions with owners

Dividends paid

-

-

-

-

-

(5,330)

-

(754)

(6,084)

Utilised in share issue

-

-

-

(4,423)

-

-

-

-

(4,423)

Issue of new shares

112

-

10,595

-

-

-

-

-

10,707

Share issue costs

-

-

-

-

(234)

-

-

-

(234)

Purchase of own shares

(28)

28

-

-

(2,484)

-

-

-

(2,484)

At 31 March 2017

1,016

1,553

13,387

-

77,049

-

(1,002)

(133)

91,870

For the year ended 31 March 2016

At 1 April 2015

798

1,500

69,714

2,593

7,523

-

(2,805)

594

79,917

Total comprehensive income

-

-

-

-

-

2,809

(1,096)

879

2,592

Cancellation of Share Premium account

-

-

(82,321)

-

82,321

-

-

-

-

Realisation of revaluations from previous years*

-

-

-

-

-

779

(779)

-

-

Transfer between reserves*

-

-

-

-

(803)

803

-

-

-

Transactions with owners

Dividends paid

-

-

-

-

-

(4,391)

-

(840)

(5,231)

Utilised in share issue

-

-

-

(2,593)

-

-

-

-

(2,593)

Unallotted shares

-

-

-

4,423

-

-

-

-

4,423

Issue of new shares

159

-

15,399

-

-

-

-

-

15,558

Share issue costs

-

-

-

-

(296)

-

-

-

(296)

Purchase of own shares

(25)

25

-

-

(2,262)

-

-

-

(2,262)

At 31 March 2016

932

1,525

2,792

4,423

86,483

-

(4,680)

633

92,108

* A transfer of £1,593,000 representing previously recognised unrealised losses on disposal of investments during the year ended 31 March 2017 (2016: gains £779,000) has been made from the Capital Reserve realised to the Revaluation reserve. A transfer of £5.1 million representing realised gains on disposal of investments, less capital expenses and capital dividends in the year (2016: £1.6 million) has been made from Capital Reserves - realised to Special reserve.

BALANCE SHEET as at 31 March 2017

2017

2016

£'000

£'000

Fixed assets

Investments

86,397

65,445

Current assets

Debtors

448

292

Cash at bank and in hand

5,523

26,713

5,971

27,005

Creditors: amounts falling due within one year

(498)

(342)

Net current assets

5,473

26,663

Net assets

91,870

92,108

Capital and reserves

Called up share capital

1,016

932

Capital redemption reserve

1,553

1,525

Share premium account

13,387

2,792

Funds held in respect of shares not yet allotted

-

4,423

Special reserve

77,049

86,483

Capital reserve - realised

-

-

Revaluation reserve

(1,002)

(4,680)

Revenue reserve

(133)

633

Total equity shareholders' funds

91,870

92,108

Basic and diluted net asset value per share

90.4p

94.1p

CASH FLOW STATEMENT for the year ended 31 March 2017

2017

2016

£'000

£'000

Cash flow from operating activities

Profit on ordinary activities before taxation

2,280

2,592

Gains on investments

(2,737)

(2,242)

(Increase)/decrease in debtors

(156)

300

(Decrease) in creditors

(14)

(385)

Cash from operations

Corporation tax paid

-

-

Net cash generated from operating activities

(627)

265

Cash flow from investing activities

Purchase of investments

(27,821)

(21,456)

Proceeds from disposal of investments

9,607

27,448

Net cash (outflow)/inflow from investing activities

(18,214)

5,992

Cash flows from financing activities

Proceeds from share issue

10,707

15,352

Funds held in respect of shares not yet allotted

(4,423)

1,831

Share issue costs

(234)

(296)

Purchase of own shares

(2,315)

(2,262)

Equity dividends paid

(6,084)

(5,026)

Net cash (outflow)/inflow from financing activities

(2,349)

9,599

(Decrease)/increase in cash

(21,190)

15,856

Net movement in cash

Beginning of year

26,713

10,857

Net cash (outflow)/inflow

(21,190)

15,856

End of year

5,523

26,713

NOTES TO THE ACCOUNTSfor the year ended 31 March 2017

1. General informationDowning ONE VCT plc ("the Company") is a venture capital trust established under the legislation introduced in the Finance Act 1995 and is domiciled in the United Kingdom and incorporated in England and Wales, and its registered office is Ergon House, Horseferry Road, London SW1P 2AL.

2. Accounting policiesBasis of accountingThe Company has prepared its financial statements in accordance with the Financial Reporting Standard 102 ("FRS 102") and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" revised November 2014 ("SORP").

The Company implements new Financial Reporting Standards issued by the Financial Reporting Council when required.

Presentation of income statementIn order to better reflect the activities of a Venture Capital Trust and in accordance with guidance issued by the Association of Investment Companies ("AIC"), supplementary information which analyses the income statement between items of a revenue and capital nature has been presented alongside the income statement. The net revenue is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Part 6 of the Income Tax Act 2007.

InvestmentsVenture capital investments are designated as "fair value through profit or loss" assets due to investments being managed and performance evaluated on a fair value basis. A financial asset is designated within this category if it is both acquired and managed on a fair value basis, with a view to selling after a period of time, in accordance with the Company's documented investment policy.

Judgements in applying accounting policies and key sources of estimation uncertaintyOf the Company's assets measured at fair value, it is possible to determine their fair values within a reasonable range of estimates. The fair value of an investment upon acquisition is deemed to be cost. Thereafter, investments are measured at fair value in accordance with FRS 102 sections 11 and 12 together with the International Private Equity and Venture Capital Valuation Guidelines ("IPEV").

The valuation methodologies for unlisted instruments (comprising equity and loan notes), used by the IPEV to ascertain the fair value of an investment, are as follows:- Price of recent investment;- Multiples;- Net assets;- Discounted cash flows or earnings (of the underlying business);- Discounted cash flows (from the investment); and- Industry valuation benchmarks.

The methodology applied takes account of the nature, facts and circumstances of the individual investment and uses reasonable data, market inputs, assumptions and estimates in order to ascertain fair value.

Where an investee company has gone into receivership, liquidation or administration where there is little likelihood of a recovery, the loss on the investment, although not physically disposed of, is treated as being realised.

Gains and losses arising from changes in fair value are included in the income statement as a capital item.

It is not the Company's policy to exercise significant influence or joint control over investee companies. Therefore the results of these companies are not incorporated into the Income Statement except to the extent of any income accrued. This is in accordance with the SORP and FRS 102 sections 14 and 15 that do not require portfolio investments to be accounted for using the equity method of accounting.

In respect of disclosures required by the SORP for the 10 largest investments held by the Company, the most recent publicly available accounts information, either as filed at Companies House, or announced to the London Stock Exchange, is disclosed. In the case of unlisted investments, this may be abbreviated information only.

Income Dividend income from investments is recognised when the Shareholders' right to receive payment has been established, normally the ex-dividend date.

Loan stock interest is accrued on a time apportioned basis, by reference to the principal outstanding and at the effective interest rate applicable and only where there is reasonable certainty of collection.

Distributions from investments in limited liability partnerships ("LLPs") are recognised as they are paid to the Company. Where such items are considered capital in nature they are recognised as capital profits.

ExpensesAll expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the income statement, all expenses have been presented as revenue items except as follows:

- Expenses which are incidental to the acquisition of an investment are deducted from the Capital Account.- Expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment.- Expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated. Investment management fees are allocated 50% to revenue and 50% to capital, in order to reflect the Directors' expected long-term view of the nature of the investment returns of the Company.

TaxationThe tax effects on different items in the Income Statement are allocated between capital and revenue on the same basis as the particular item to which they relate using the Company's effective rate of tax for the accounting period.

Due to the Company's status as a Venture Capital Trust and the continued intention to meet the conditions required to comply with Part 6 of the Income Tax Act 2007, no provision for taxation is required in respect of any realised or unrealised appreciation of the Company's investments.

Deferred taxation is not discounted and is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when the obligations or rights crystallise based on tax rates and law enacted or substantively enacted at the balance sheet date. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the accounts. Deferred tax assets are only recognised if it is expected that future taxable profits will be available to utilise such assets and are recognised on a non-discounted basis.

Cash and cash equivalentsCash and cash equivalents include cash in hand and deposits held at call with banks with an original maturity of three months or less.

Other debtors and other creditorsOther debtors (including accrued income) and other creditors are included within the accounts at amortised cost.

Share issue costsShare issue costs have been deducted from the special reserve account.

Funds held in respect of shares not yet allottedCash received in respect of applications for new shares that have not yet been allotted is shown as "Funds held in respect of shares not yet allotted" and recorded on the Balance Sheet.

Segmental reportingThe Company only has one class of business and one market.

3. Basic and diluted return per share

2017

2016

Return per share based on:

£'000

£'000

Net revenue return for the financial year

(12)

879

Net capital gain for the financial year

2,292

1,713

Total return for the financial year

2,280

2,592

Weighted average number of shares in issue

101,137,288

85,175,415

As the Company has not issued any convertible securities or share options, there is no dilutive effect on return per share. The return per share disclosed therefore represents both the basic and diluted return per share.

4. Principal RisksThe Company's investment activities expose the Company to a number of risks associated with financial instruments and the sectors in which the Company invests. The principal financial risks arising from the Company's operations are:

- Investment risks;- Credit risk; and- Liquidity risk.

The Board regularly reviews these risks and the policies in place for managing them. There have been no significant changes to the nature of the risks that the Company is exposed to over the year and there have also been no significant changes to the policies for managing those risks during the year.

The risk management policies used by the Company in respect of the principal financial risks and a review of the financial instruments held at the year-end, are provided below:

Market risksAs a VCT, the Company is exposed to investment risks in the form of potential losses and gains that may arise on the investments it holds in accordance with its investment policy. The management of these investment risks is a fundamental part of the investment activities undertaken by the Investment Adviser and overseen by the Board. The Investment Adviser monitors investments through regular contact with management of investee companies, regular review of management accounts and other financial information and attendance at investee company board meetings. This enables the Investment Adviser to manage the investment risk in respect of individual investments. Investment risk is also mitigated by holding a diversified portfolio spread across various business sectors and asset classes.

The key investment risks to which the Company is exposed are:

- Investment price risk; and- Interest rate risk.

The Company has undertaken sensitivity analysis on its financial instruments, split into the relevant component parts, taking into consideration the economic climate at the time of review in order to ascertain the appropriate risk allocation.

Investment price riskInvestment price risk arises from uncertainty about the future prices and valuations of financial instruments held in accordance with the Company's investment objectives. It represents the potential loss that the Company might suffer through investment price movements in respect of quoted investments and also changes in the fair value of unquoted investments that it holds.

Interest risk The Company accepts exposure to interest rate risk on floating-rate financial assets through the effect of changes in prevailing interest rates. The Company receives interest on its cash deposits at a rate agreed with its bankers. Investments in loan stock and fixed interest securities attract interest predominately at fixed rates. A summary of the interest rate profile of the Company's investments is shown below.

Interest rate profile of financial assets and financial liabilitiesThere are three levels of interest which are attributable to the financial instruments as follows:

The Company monitors the level of income received from fixed, floating and non interest rate assets and, if appropriate, may make adjustments to the allocation between the categories, in particular, should this be required to ensure compliance with the VCT regulations.

As the Bank of England base rate fell for the first time in seven years by 0.25% to 0.25% per annum it is not believed that a further reduction from this level is likely. Any potential change in the base rate, at the current level, would have an immaterial impact on the net assets and total return of the Company.

Credit riskCredit risk is the risk that the counterparty to a financial instrument is unable to discharge a commitment to the Company made under that instrument. The Company is exposed to credit risk through its holdings of loan stock in investee companies, investments in fixed interest securities, cash deposits and debtors.

The Investment Adviser manages credit risk in respect of loan notes with a similar approach as described under investment risks above. In addition the credit risk is mitigated by registering floating charges, covering the full par value of the loan stock in the form of fixed and floating charges over the assets of the investee companies. The strength of this security in each case is dependent on the nature of the investee company's business and its identifiable assets. The level of security is a key means of managing credit risk. Similarly, the management of credit risk associated with interest, dividends and other receivables is covered within the investment management procedures.

Cash is mainly held at Royal Bank of Scotland plc, with a balance also maintained at Bank of Scotland plc, both of which are A-rated financial institutions and ultimately part-owned by the UK Government. Consequently, the Directors consider that the credit risk associated with cash deposits is low.

There have been no changes in fair value during the year that can be directly attributable to changes in credit risk.

As at 31 March 2017, of the loan stock classified as "past due" below, £9,848,000 relates to the principal of loan notes where, although the principal remains within the term, the investee company is not fully servicing the interest obligations under the loan note and is in arrears. Notwithstanding the arrears of interest, the Directors do not consider that the loan note itself has been impaired or the maturity of the principal has altered.

As at 31 March 2017, of the loan stock classified as "past due" below, £2,101,000 relates to the principal of loan notes where the principal has passed its maturity date. As at the balance sheet date, the extent to which the principal is past its maturity date, £1.4 million falls within the banding of nil to 2 years past due and £0.7 million is 3 to 5 years past due. Notwithstanding this information, the Directors do not consider the loan notes to be impaired at the current time or that maturity dates of the principal have altered.

As at 31 March 2016, of the loan stock classified as "past due" below, £7,585,000 relates to the principal of loan notes where, although the principal remains within term, the investee company is not fully servicing the interest obligations under the loan note and is in arrears. Notwithstanding the arrears of interest, the Directors do not consider that the loan note itself has been impaired or the maturity of the principal has altered.

As at 31 March 2016, of the loan stock classified as "past due" below, £2,605,000 relates to the principal of loan notes where the principal has passed its maturity date. As at the balance sheet date, the extent to which the principal is past its maturity date, £2.1 million falls within the banding of nil to 2 years past due and £0.5 million is 3 to 4 years past due. Notwithstanding this information, the Directors do not consider the loan notes to be impaired at the current time or that the maturity dates of the principals have altered.

Liquidity riskLiquidity risk is the risk that the Company encounters difficulties in meeting obligations associated with its financial liabilities. Liquidity risk may also arise from either the inability to sell financial instruments when required at their fair values or from the inability to generate cash inflows as required. The Company normally has a relatively low level of creditors (2017: £498,000, 2016: £342,000) and has no borrowings. Also most quoted investments held by the Company are considered to be readily realisable. The Company always holds sufficient levels of funds as cash and readily realisable investments in order to meet expenses and other cash outflows as they arise. For these reasons the Board believes that the Company's exposure to liquidity risk is minimal.

The Company's liquidity risk is managed by the Investment Adviser in line with guidance agreed with the Board and is reviewed by the Board at regular intervals.

ANNOUNCEMENT BASED ON AUDITED ACCOUNTS The financial information set out in this announcement does not constitute the Company's statutory financial statements in accordance with section 434 Companies Act 2006 for the year ended 31 March 2017, but has been extracted from the statutory financial statements for the year ended 31 March 2017 which were approved by the Board of Directors on 17 July 2017 and will be delivered to the Registrar of Companies. The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.

The statutory accounts for the year ended 31 March 2016 have been delivered to the Registrar of Companies and received an Independent Auditors report which was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.

A copy of the full annual report and financial statements for the year ended 31 March 2017 will be printed and posted to shareholders shortly. Copies will also be available to the public at the registered office of the Company at Ergon House, Horseferry Road, London SW1P 2AL and will be available for download from and www.downing.co.uk

CHAIRMAN'S STATEMENTI am pleased to present the Company's Annual Report for the year ended 31 March 2017.

The year saw a significant level of new funds raised by the Company and a fair amount of investment activity as the task of employing the new funds got underway, along with several realisations from some of the existing investments.

Net asset value and resultsAs at 31 March 2017, the net asset value per share ("NAV") stood at 90.4p, an increase of 2.3p (2.4%) after adding back dividends of 6.0p per share which were paid during the year.

The Income Statement shows a return attributable to equity shareholders for the year of £2.3 million comprising a revenue loss of £12,000 and a capital return of £2.3 million.

FundraisingThe Company launched an Offer for Subscription in December 2015, which closed on 30 September 2016. The offer raised total gross proceeds of £19.3 million, which provides the Company with a significant level of new funds and allows it to participate in attractive new investment opportunities as they arise.

Investment activity and performanceAt the year end, the Company held a portfolio of 90 investments. Of these, 31 are either quoted on AIM or the NEX Exchange Growth Market and have a value of £24.5 million (28% of the portfolio). The 59 unquoted investments have a value of £61.9 million and represent 72% of the portfolio.

Two new quoted investments were made at a total cost of £427,000. There were three quoted investment disposals generating proceeds of £656,000.

In the unquoted portfolio, there were 19 realisations, producing proceeds of £9.0 million and realised gains of £524,000. One follow-on investment was made at a cost of £1.6 million and 14 new investments at £25.8 million.

The quoted portfolio showed net unrealised gains of £840,000 over the year. At the year end, the Board reviewed the valuations of the unquoted investments and made a number of adjustments. Overall the unquoted portfolio showed total unrealised gains of £1.2 million for the year. Net unrealised gains for the full portfolio were therefore £2.1 million.

Further details on the investment activity are included in the Investment Adviser's Report.

DividendsThe Company has a policy of seeking to pay annual dividends of at least 4% of net assets per annum.

In view of the level of realisations achieved in the period, the Board is proposing a final dividend of 4.5p per share to be paid on 18 August 2017, subject to Shareholder approval at the forthcoming AGM, to Shareholders on the register at 21 July 2017. This will bring total dividends in respect of the year ended 31 March 2017 to 7.5p per share, which represents a yield based on opening NAV of 8.0% pa.

Shareholders are reminded that the Company operates a Dividend Reinvestment Scheme for those investors that wish to reinvest their dividends and obtain further income tax relief on the reinvested dividend. A Dividend Reinvestment Form is available on Downing's website or further information can be obtained by contacting Downing.

Share buybacksThe Company continues to operate a policy of buying in its own shares that become available in the market at a 5% discount to NAV (subject to liquidity and any regulatory restrictions).

During the year, the Company purchased 2.8 million shares at an average price of 87.2p per share. Overall, the total cash returned to shareholders via share buybacks and this year's total dividend of 7.5p per share is approximately equal to the level of cash proceeds received during the year.

The Company retains Panmure Gordon as its corporate broker to assist in operating the share buyback process and ensuring that the quoted spread on the Company's shares remains at a reasonable level.

DirectorateAs reported in the Half Yearly Report, two Directors, Helen Sinclair and Andrew Griffiths, resigned during the year. I would like to once again thank Helen and Andrew for their contributions as non-executive directors since the major merger in 2013 which created Downing ONE. My colleagues and I wish them every success in their other ventures.

Now that the original six VCTs that were merged together have been successfully integrated into one Company, the Directors believe that a Board comprising three non-executive directors is appropriate for the Company at the current time and therefore do not propose to make any new appointments for the time being.

Fundraising plansThe Company did not launch a new fundraising for the 2016/17 tax year, partly because it had raised significant funds in the prior tax year which were still in the process of being invested. Progress is now being made in investing those funds and the Board has therefore decided to consider undertaking a new Offer for Subscription for the 2017/18 tax year. If the Board decides to proceed full details will be sent to Shareholders as they become available.

In order to give the Company flexibility to launch this new offer without having to incur the expense of issuing a separate Shareholder circular, resolutions will be proposed at the forthcoming AGM to give the Directors authority to allot and waive pre-exemption rights on up to approximately £35 million worth of new shares.

Annual General MeetingThe Company's next Annual General Meeting ("AGM") will be held at Downing LLP, Fifth Floor, Ergon House, Horseferry Road, London, SW1P 2AL at 10.30 a.m. on 15 August 2017.

Three items of special business are proposed at the AGM: - two in respect of the allotment of shares as described above; and- one in respect of the authority to buy back shares as noted above.

OutlookThe new VCT regulations continue to provide challenges for the Investment Adviser in both securing and structuring new investments and in supporting existing portfolio companies. In particular, the new rules heavily restrict opportunities to invest in AIM-quoted companies. The Company does however continue to hold a substantial portfolio of AIM-quoted investments so can continue to benefit from that for the time being.

Since the year end, the Company has made a £5 million non-qualifying investment into the Downing Micro-Cap Strategic Trust plc, a new Investment Trust managed by the same team that advises the Company on its AIM-quoted portfolio. As an Investment Trust, this is one of the few types of non-qualifying investments now permitted under the VCT regulations and will provide the Company with liquidity and the possibilities of some growth on funds that would otherwise be held as cash while awaiting investment in new VCT qualifying opportunities. For the avoidance of doubt, the Board has obtained agreement from the Advisor that there will be no "double charging" of fees.

Over the next year, we expect to see the more recent investments develop businesses that have the potential to drive steady performance of the Company in the future. At the same time, the Adviser will be exploring realisation opportunities for the more mature investments, although, as ever, will only pursue exits if they consider the price and timing to be appropriate.

I look forward to meeting Shareholders at the AGM and to reporting developments in my statement with the Half Year Report to 30 September 2017.

Chris KayChairman

INVESTMENT ADVISER'S REPORT IntroductionThe following is a review of the performance of both the quoted and unquoted investment portfolios.

At 31 March 2017, the Company held a portfolio of investments in 90 quoted and unquoted companies, valued in total at £86.4 million.

Net asset value and resultsThe net asset value per Share ("NAV") at 31 March 2017 stood at 90.4p, compared to the NAV at 31 March 2016 of 94.1p. Total Return (NAV plus cumulative dividends paid since the merger in 2013) is 108.4p.

The return on ordinary activities after taxation for the year was £2.3 million, comprising a revenue loss of £12,000 and a capital profit of £2.3 million.

Unquoted Venture Capital investmentsInvestment activityAt 31 March 2017, the unquoted portfolio was valued at £61.9 million, comprising 59 investments, spread across a number of sectors.

During the period, there were 14 new investments totalling £25.8 million and one follow-on investment totalling £1.6 million. The new investments were as follows:

£2.5 million was invested in Vectis Alpha Limited which is seeking to build and develop infrastructure opportunities.

£700,000 was invested in Avid Technology Group Limited, a manufacturer of electrified ancillaries for internal combustion engines.

Brownfields Trading Limited is seeking to develop small scale waste disposal projects and £2.5 million has been invested in this company.

£2.5 million was invested in Yamuna Renewables Limited, which is seeking investment opportunities in the wood refinery sector.

Jito Trading Limited, Morava Limited and Rhodes Solutions Limited are all exploring opportunities in the wood refinery sector. £2.5 million was invested into each company. After the year end Morava was wound up in order to free up cash for other investments.

£1.5 million was invested into Pantheon Trading Limited which is seeking to develop and operate roof mounted PV systems in Cyprus.

£920,000 was invested into both Ironhide Generation Limited and Indigo Generation Limited. £738,000 was invested in Rockhopper Renewables Limited and £422,000 in SF Renewables (Solar) Limited which are in the process of acquiring land in India to build and operate 15MW ground mounted solar arrays.

One non-qualifying investment of £5 million was made into DoneLoans Limited, an investment company which makes secured loans.

£600,000 was invested into Xupes Limited, a pre-owned luxury e-commerce business based in Bishops Stortford, specialising in watches, handbags, jewellery and antiques.

A further £1.6 million was invested into Pilgrim Trading Limited which will be converting two vacant properties in London into children's day nurseries.

Realisations of investments in the year generated proceeds of £9.0 million and total profits over holding value of £524,000 from 15 full exits, and 4 partial exits. A summary of the most significant realisations is shown below:

A further distribution of £195,000 was received from the refinancing of Quadrate Catering Limited in the prior year, generating an additional profit of £161,000.

Tramps Night Club Limited, the owner of a night club in the West Midlands, has started repaying the loan notes under a refinancing arrangement. A total of £427,000 was received during the year at a profit over carrying value of £221,000.

Gatewales Limited holds rights to profit shares from a development project. The project is performing in line with plans and the profit shares are now being paid out, with £151,000 received in the year.

Kidspace Adventures Holdings Limited, which owns three well established children's play areas in Croydon, Romford and Epsom, was sold and generated proceeds of £2.8 million, being £210,000 in excess of original cost.

Two non-qualifying loans were repaid in full in the year, being Hobblers Heath Limited and Kidspace Adventures Limited, which repaid a total of £1.2 million.

Deferred consideration totalling £30,000 was received from Kilmarnock Monkey Bar Limited and Liverpool Nurseries (Holdings) Limited, both of which were sold in prior years.

Unquoted Venture Capital investmentsCedarville Limited was established with the intention of developing and operating garden centres in the UK. Morava Limited was incorporated to build and develop biomass boilers in the wood refinery sector. Following a lack of suitable investment opportunities for either company, both investments were repaid in full generating total cash of £3.5 million for deployment in other qualifying prospective investments.

Redmed Limited paid final distributions of £36,000, generating a loss of £28,000 compared to holding value.

Portfolio valuation There have been a number of valuation movements in the unquoted portfolio during the year with an overall value uplift of £1.2 million. The most significant value movements are shown below.

Leytonstone Pub Limited owns and operates The Red Lion pub in Leytonstone and continues to trade well. An independent valuation also demonstrated strong growth in the underlying property value, and these two factors combined to generate a further uplift in value of £750,000.

Pearce & Saunders Limited, is a small pub group with a portfolio of three pubs in the London area. These have similarly benefitted from the continued increase in property prices across the capital, resulting in an uplift in value of £475,000 (now held at cost).

Cadbury House Holdings Limited was uplifted by £200,000 during the year. The company owns and operates a health club, restaurant and conference centre near Bristol which continues to perform well.

Fenkle Street LLP, is a property development company that purchased a building in Newcastle and converted it into a hotel. The hotel is trading well and the valuation has been uplifted by £141,000 to reflect this.

Kimbolton Lodge Limited, the elderly care home in Bedford, was valued up £141,000 and is reflective of sustained levels of good occupancy.

Tramps Night Club Limited the owner of a night club in the West Midlands, has increased in value by £171,000 following a refinancing agreement made during the year and the ongoing repayment of the loan.

Unfortunately significant write downs were also required against three investments in the period.

Oak Grove Renewables Limited, an anaerobic digestion plant in Norfolk has been reduced in value by £284,000, due to continued performance issues at the facility.

Curo Compensation Limited offers a 'software as a service' solution to blue chip companies to manage their annual staff compensation process. The company is seeking further funding in 2017 to support its growth and ongoing development. The share price of this new round has been taken in to consideration when valuing the Downing ONE holding and, as such, the year-end value has been reduced by £235,000.

Mosaic Spa and Health Club Limited continues to progress an exit strategy. The valuation has been adjusted down by £260,000 at the year end to reflect the anticipated final proceeds.

Other smaller valuation adjustments totalled to a net gain of £147,000 over the year.

Quoted investmentsInvestment activityAs at 31 March 2017, the quoted portfolio was valued at £24.5 million comprising of 31 holdings. Over 13% of the quoted portfolio is accounted for in the top 10 holdings, reflective of the focused investment management approach that the Manager deploys.

Over the year to 31 March 2017, the valuation of the quoted portfolio (taking into account realised and unrealised movements) has risen by over 3%, behind the main AIM indices over the same period which experienced gains of up to 30%. The predominant reason for this underperformance is stock-specific within the underlying portfolio, and also due to the fact that the Company does not invest in mining and extraction companies or mainstream IPOs, both of which experienced a buoyant period for share price rises.

The quoted portfolio saw relatively little change in the year. Two partial and one full disposal were made, realising gains (versus cost) of £79,000. There were two new quoted holdings in the year, the largest being an investment of £377,000 into SysGroup plc.

Portfolio MovementsThe main positive contributors to performance were Craneware Plc, the market leader in Value Cycle solutions for the US healthcare market, which contributed £867,000 of unrealised gains. The Company experienced strong trading and exceeded market expectations.

Science in Sport plc, the leading sports nutrition company that develops, manufactures and markets sports nutrition products for professional athletes and sports enthusiasts ("SIS") continued its growth trajectory and booked another solid year of top-line growth, growing turnover by 30% in the year. This, combined with the announcement that they are suppliers of products to the Olympic US Cycling team, helped buoy the share price. SIS contributed £749,000 of unrealised gains to the portfolio.

Amino Technologies plc, the global provider of digital TV entertainment and cloud solutions to network operators, experienced an unrealised gain of £469,000 in the portfolio. This was due to positive trading announcements following a year of difficulty integrating the Entone acquisition. The share price reflected the confidence that the management team now have in the combined business.

Meanwhile, on the negative, Inland Homes plc, a housebuilder with a specialist expertise in the acquisition and regeneration of brownfield sites, has reduced in value by £679,000, reflecting caution on UK housebuilding post Brexit and the fact that 23 legal completions were deferred following financial difficulties with one of their contractors. This meant that earnings would fall into 2017. There have been a number of announcements on planning consents and new builds since then which underpin our estimate of the Net Asset Value of this company.

Tracsis plc, leading provider of software and technology led products and services for the traffic data and transportation industry was also a negative contributor to performance, experiencing £655,000 of losses in the portfolio. This was due to caution that the full year results to the end of June 2017 would be heavily second half weighted; which the stock market viewed as a potential looming profits warning. We engaged with management and believe that although there were some short term and quantifiable challenges in the first half, that the longer term prospects of the company remain intact.

Angle plc, the specialist medtech company focusing on cancer related solutions saw some profit taking in its shares. The company initiated two 200 patient clinical studies in Europe and the US for the Company's first clinical application for detection of ovarian cancer in women. Interim evaluations of the first 50 patients in both studies have been positive. The company is still loss making, however is adequately funded for the medium term.

Generally we are confident of the longer term prospects for the Quoted Portfolio.

OutlookThere has been significant unquoted investment activity in the period in a number of sectors, including several smaller, higher risk and earlier stage investments. The focus is now on supporting these businesses to achieve growth over the next few years whilst also pursuing appropriate exit strategies for the more mature investments.

The portfolio as a whole is well spread across a large number of investments and remains relatively stable however, we believe upside potential remains.

Downing LLP

REVIEW OF INVESTMENTS

Portfolio of investmentsThe following investments, all of which are incorporated in England and Wales, were held at 31 March 2017:

Cost

Valuation

Valuationmovementin year

% ofportfolioby value

Total invested by Funds also managed by Downing LLP (1)

£'000

£'000

£'000

£'000

Top ten venture capital investments

Vulcan Renewables Limited

5,030

5,548

-

6.0%

5,839

DoneLoans Limited

5,000

5,000

-

5.4%

-

Downing Care Homes Holdings Limited

3,881

4,250

-

4.6%

-

Tracsis plc *

1,443

3,198

(655)

3.5%

2,845

Cadbury House Holdings Limited

3,081

3,075

200

3.3%

1,613

Baron House Developments LLP

2,695

2,695

-

2.9%

2,055

Leytonstone Pub Limited

1,061

2,650

750

2.9%

-

Pilgrim Trading Limited

2,594

2,594

-

2.8%

3,072

Brownfields Trading Limited

2,500

2,500

-

2.7%

2,500

Jito Trading Limited

2,500

2,500

-

2.7%

2,500

29,785

34,010

295

36.8%

20,424

Other venture capital investments

Rhodes Solutions Limited

2,500

2,500

-

2.7%

2,500

Vectis Alpha Limited

2,500

2,500

-

2.7%

2,500

Yamuna Renewables Limited

2,500

2,500

-

2.7%

2,500

Universe Group plc *

1,586

2,349

(212)

2.6%

2,476

Craneware plc*

850

2,201

867

2.4%

2,736

Anpario plc*

1,448

1,886

340

2.1%

3,174

Inland Homes plc*

1,526

1,786

(679)

1.9%

2,357

Science in Sport plc*

1,239

1,734

749

1.9%

4,306

Mosaic Spa and Health Club Limited

2,747

1,570

(260)

1.7%

2,337

Plastics Capital plc*

849

1,528

310

1.7%

2,447

Pantheon Trading Limited

1,500

1,500

-

1.6%

-

Quadrate Catering Limited

1,500

1,500

-

1.6%

2,300

Quadrate Spa Limited

1,872

1,500

-

1.6%

2,300

Harrogate Street LLP

1,400

1,400

-

1.5%

-

Pearce & Saunders Limited

1,320

1,320

475

1.4%

1,680

Nomansland Biogas Limited

1,300

1,300

-

1.4%

4,374

Finsbury Food Group plc*

655

1,165

(100)

1.3%

2,858

Amino Technologies plc*

700

1,061

469

1.2%

4,453

Vianet Group plc*

952

936

(41)

1.0%

-

Indigo Generation Limited

920

920

-

1.0%

5,880

Ironhide Generation Limited

920

920

-

1.0%

3,880

Redhall Group plc*

500

900

225

1.0%

1,620

Pittards plc*

1,350

889

113

1.0%

1,379

Pabulum Pubs Limited

807

844

8

0.9%

915

Cohort plc*

394

822

86

0.9%

-

Oak Grove Renewables Limited

1,365

781

(284)

0.8%

6,774

Data Centre Response Limited

557

764

62

0.8%

-

Fenkle Street LLP

346

764

141

0.8%

1,660

Ludorum plc

3,573

750

-

0.8%

110

Rockhopper Renewables Limited

738

738

-

0.8%

3,819

Avid Technology Group Limited

700

700

-

0.8%

-

Gara Rock Resort Limited

672

672

-

0.7%

4,354

Sprue Aegis plc*

545

637

(292)

0.7%

2,379

Kimbolton Lodge Limited

664

604

141

0.7%

-

Wickham Solar Limited

472

600

50

0.7%

6,637

Xupes Limited

600

600

-

0.7%

200

Tramps Night Club Limited

849

523

171

0.6%

-

Curo Compensation Limited

688

453

(235)

0.5%

430

SF Renewables (Solar) Limited

422

422

-

0.5%

6,778

Angle plc*

678

418

(276)

0.5%

-

Fresh Green Power Limited

400

400

-

0.4%

600

Pennant International Group plc*

335

386

248

0.4%

1,638

Sanderson Group plc*

336

381

(25)

0.4%

2,038

Augusta Pub Company Limited

290

349

25

0.4%

5,005

Brooks Macdonald Group plc*

257

340

31

0.4%

1,446

Norman Broadbent plc*

906

301

-

0.3%

752

Dillistone Group plc*

411

298

(3)

0.3%

-

Brady Public Limited Company*

272

296

83

0.3%

-

SysGroup plc*

377

289

(89)

0.3%

588

Hoole Hall Country Club Holdings Limited

2,316

250

-

0.3%

-

City Falkirk Limited

326

236

-

0.3%

1,062

FCT No.1 Limited

228

228

-

0.2%

448

Fubar Stirling Limited

357

225

-

0.2%

1,014

Green Energy Production UK Limited

200

200

-

0.2%

300

Hornby plc*

500

159

(9)

0.2%

1,514

Avacta Group plc*

168

114

(99)

0.1%

-

London City Shopping Centre Limited

110

110

-

0.1%

429

Pressure Technologies plc*

249

103

(3)

0.1%

-

Pro-Global Insurance Solutions plc*

61

100

-

0.1%

-

Gatewales Limited

71

98

2

0.1%

426

Frontier IP Group plc*

30

95

39

0.1%

-

Pearce & Saunders DevCo Limited

88

88

-

0.1%

112

Giving Limited

83

83

-

0.1%

-

Leytonstone Pub No1 Limited

81

81

-

0.1%

-

Flowgroup plc*

385

77

(212)

0.1%

-

MI Downing UK Micro-Cap Growth Fund B*

50

50

-

0.1%

Mi-Pay Group plc (Aimshell)*

136

41

(26)

0.0%

-

Wheelsure Holdings plc**

48

30

-

0.0%

-

Cheers Dumbarton Limited

64

22

-

0.0%

101

Future Biogas (Reepham Rd) Limited

427

-

-

0.0%

-

Top Ten Holdings plc

399

-

-

0.0%

-

Future Biogas (SF) Limited

320

-

-

0.0%

-

Hoole Hall Spa and Leisure Club Limited

297

-

-

0.0%

-

The Thames Club Limited

175

-

-

0.0%

-

China Food Company plc

149

-

-

0.0%

-

Resource Reserve Recovery Limited

6

-

-

0.0%

Commercial Street Hotel Limited

-

-

-

0.0%

-

Antelope Pub No 1 Limited

-

-

-

0.0%

-

The 3D Pub Co Limited

-

-

-

0.0%

-

57,612

52,387

1,790

56.9%

109,586

Total investments

87,397

86,397

2,085

93.7%

130,010

Cash at bank and in hand

5,523

6.3%

91,920

100.0%

The Company also invested into Heyford Homes VCT Limited, Imagelinx plc, Invocas Group plc, Lochrise Limited, and Antelope Pub no 1 Limited. These investments were acquired at negligible value and continued to be valued at the same level.

All venture capital investments are unquoted unless otherwise stated.

* Quoted on AIM ** Quoted on the NEX Exchange Growth Market

(1) Other funds also managed by Downing LLP as Investment Manager or Adviser as at 31 March 2017:

Directors' responsibilities statementThe Directors are responsible for preparing the Strategic Report, the Report of the Directors, the Directors' Remuneration Report, the separate Corporate Governance Statement and the financial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the annual report includes information required by the Listing Rules of the Financial Conduct Authority.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and Republic ofIreland (FRS 102). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

- select suitable accounting policies and then apply them consistently;- make judgments and accounting estimates that are reasonable and prudent;- state whether the financial statements have been prepared in accordance with applicable UK Accounting Standards, subject to any material departures disclosed and explained in the financial statements; and- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and to disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements and the Directors Remuneration Report comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In addition, each of the Directors considers that the Annual Report, taken as a whole, is fair, balanced and undertakes and provides the information necessary to assess the Company's position, performance, business model and strategy.

INCOME STATEMENTfor the year ended 31 March 2017

Year ended 31 March 2017

Year ended 31 March 2016

Revenue

Capital

Total

Revenue

Capital

Total

£'000

£'000

£'000

£'000

£'000

£'000

Income

1,736

209

1,945

2,790

-

2,790

Gains on investments

-

2,737

2,737

-

2,242

2,242

1,736

2,946

4,682

2,790

2,242

5,032

Investment management fees

(875)

(875)

(1,750)

(756)

(756)

(1,512)

Other expenses

(652)

-

(652)

(928)

-

(928)

Return on ordinary activities before tax

209

2,071

2,280

1,106

1,486

2,592

Tax on total comprehensive income and ordinary activities

(221)

221

-

(227)

227

-

Return attributable to equity shareholders

(12)

2,292

2,280

879

1,713

2,592

Basic and diluted return per share

-

2.3p

2.3p

1.0p

2.0p

3.0p

The total column within the Income Statement represents the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS 102"). There are no other items of comprehensive income. The supplementary revenue and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in November 2014 by the Association of Investment Companies ("AIC SORP").

STATEMENT OF CHANGES IN EQUITYfor the year ended 31 March 2017

Called up Share Capital

Capital redemptionreserve

Sharepremium account

Funds held in respect of shares not yet allotted

Specialreserve

Capitalreserve-realised

Revaluationreserve

Revenuereserve

Total

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

For the year ended 31 March 2017

At 1 April 2016

932

1,525

2,792

4,423

86,483

-

(4,680)

633

92,108

Total comprehensive income

-

-

-

-

-

207

2,085

(12)

2,280

Realisation of revaluations from previous years*

-

-

-

-

-

(1,593)

1,593

-

-

Transfer between reserves*

-

-

-

-

(6,716)

6,716

-

-

-

Transactions with owners

Dividends paid

-

-

-

-

-

(5,330)

-

(754)

(6,084)

Utilised in share issue

-

-

-

(4,423)

-

-

-

-

(4,423)

Issue of new shares

112

-

10,595

-

-

-

-

-

10,707

Share issue costs

-

-

-

-

(234)

-

-

-

(234)

Purchase of own shares

(28)

28

-

-

(2,484)

-

-

-

(2,484)

At 31 March 2017

1,016

1,553

13,387

-

77,049

-

(1,002)

(133)

91,870

For the year ended 31 March 2016

At 1 April 2015

798

1,500

69,714

2,593

7,523

-

(2,805)

594

79,917

Total comprehensive income

-

-

-

-

-

2,809

(1,096)

879

2,592

Cancellation of Share Premium account

-

-

(82,321)

-

82,321

-

-

-

-

Realisation of revaluations from previous years*

-

-

-

-

-

779

(779)

-

-

Transfer between reserves*

-

-

-

-

(803)

803

-

-

-

Transactions with owners

Dividends paid

-

-

-

-

-

(4,391)

-

(840)

(5,231)

Utilised in share issue

-

-

-

(2,593)

-

-

-

-

(2,593)

Unallotted shares

-

-

-

4,423

-

-

-

-

4,423

Issue of new shares

159

-

15,399

-

-

-

-

-

15,558

Share issue costs

-

-

-

-

(296)

-

-

-

(296)

Purchase of own shares

(25)

25

-

-

(2,262)

-

-

-

(2,262)

At 31 March 2016

932

1,525

2,792

4,423

86,483

-

(4,680)

633

92,108

* A transfer of £1,593,000 representing previously recognised unrealised losses on disposal of investments during the year ended 31 March 2017 (2016: gains £779,000) has been made from the Capital Reserve realised to the Revaluation reserve. A transfer of £5.1 million representing realised gains on disposal of investments, less capital expenses and capital dividends in the year (2016: £1.6 million) has been made from Capital Reserves - realised to Special reserve.

BALANCE SHEET as at 31 March 2017

2017

2016

£'000

£'000

Fixed assets

Investments

86,397

65,445

Current assets

Debtors

448

292

Cash at bank and in hand

5,523

26,713

5,971

27,005

Creditors: amounts falling due within one year

(498)

(342)

Net current assets

5,473

26,663

Net assets

91,870

92,108

Capital and reserves

Called up share capital

1,016

932

Capital redemption reserve

1,553

1,525

Share premium account

13,387

2,792

Funds held in respect of shares not yet allotted

-

4,423

Special reserve

77,049

86,483

Capital reserve - realised

-

-

Revaluation reserve

(1,002)

(4,680)

Revenue reserve

(133)

633

Total equity shareholders' funds

91,870

92,108

Basic and diluted net asset value per share

90.4p

94.1p

CASH FLOW STATEMENT for the year ended 31 March 2017

2017

2016

£'000

£'000

Cash flow from operating activities

Profit on ordinary activities before taxation

2,280

2,592

Gains on investments

(2,737)

(2,242)

(Increase)/decrease in debtors

(156)

300

(Decrease) in creditors

(14)

(385)

Cash from operations

Corporation tax paid

-

-

Net cash generated from operating activities

(627)

265

Cash flow from investing activities

Purchase of investments

(27,821)

(21,456)

Proceeds from disposal of investments

9,607

27,448

Net cash (outflow)/inflow from investing activities

(18,214)

5,992

Cash flows from financing activities

Proceeds from share issue

10,707

15,352

Funds held in respect of shares not yet allotted

(4,423)

1,831

Share issue costs

(234)

(296)

Purchase of own shares

(2,315)

(2,262)

Equity dividends paid

(6,084)

(5,026)

Net cash (outflow)/inflow from financing activities

(2,349)

9,599

(Decrease)/increase in cash

(21,190)

15,856

Net movement in cash

Beginning of year

26,713

10,857

Net cash (outflow)/inflow

(21,190)

15,856

End of year

5,523

26,713

NOTES TO THE ACCOUNTSfor the year ended 31 March 2017

1. General informationDowning ONE VCT plc ("the Company") is a venture capital trust established under the legislation introduced in the Finance Act 1995 and is domiciled in the United Kingdom and incorporated in England and Wales, and its registered office is Ergon House, Horseferry Road, London SW1P 2AL.

2. Accounting policiesBasis of accountingThe Company has prepared its financial statements in accordance with the Financial Reporting Standard 102 ("FRS 102") and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" revised November 2014 ("SORP").

The Company implements new Financial Reporting Standards issued by the Financial Reporting Council when required.

Presentation of income statementIn order to better reflect the activities of a Venture Capital Trust and in accordance with guidance issued by the Association of Investment Companies ("AIC"), supplementary information which analyses the income statement between items of a revenue and capital nature has been presented alongside the income statement. The net revenue is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Part 6 of the Income Tax Act 2007.

InvestmentsVenture capital investments are designated as "fair value through profit or loss" assets due to investments being managed and performance evaluated on a fair value basis. A financial asset is designated within this category if it is both acquired and managed on a fair value basis, with a view to selling after a period of time, in accordance with the Company's documented investment policy.

Judgements in applying accounting policies and key sources of estimation uncertaintyOf the Company's assets measured at fair value, it is possible to determine their fair values within a reasonable range of estimates. The fair value of an investment upon acquisition is deemed to be cost. Thereafter, investments are measured at fair value in accordance with FRS 102 sections 11 and 12 together with the International Private Equity and Venture Capital Valuation Guidelines ("IPEV").

The valuation methodologies for unlisted instruments (comprising equity and loan notes), used by the IPEV to ascertain the fair value of an investment, are as follows:- Price of recent investment;- Multiples;- Net assets;- Discounted cash flows or earnings (of the underlying business);- Discounted cash flows (from the investment); and- Industry valuation benchmarks.

The methodology applied takes account of the nature, facts and circumstances of the individual investment and uses reasonable data, market inputs, assumptions and estimates in order to ascertain fair value.

Where an investee company has gone into receivership, liquidation or administration where there is little likelihood of a recovery, the loss on the investment, although not physically disposed of, is treated as being realised.

Gains and losses arising from changes in fair value are included in the income statement as a capital item.

It is not the Company's policy to exercise significant influence or joint control over investee companies. Therefore the results of these companies are not incorporated into the Income Statement except to the extent of any income accrued. This is in accordance with the SORP and FRS 102 sections 14 and 15 that do not require portfolio investments to be accounted for using the equity method of accounting.

In respect of disclosures required by the SORP for the 10 largest investments held by the Company, the most recent publicly available accounts information, either as filed at Companies House, or announced to the London Stock Exchange, is disclosed. In the case of unlisted investments, this may be abbreviated information only.

Income Dividend income from investments is recognised when the Shareholders' right to receive payment has been established, normally the ex-dividend date.

Loan stock interest is accrued on a time apportioned basis, by reference to the principal outstanding and at the effective interest rate applicable and only where there is reasonable certainty of collection.

Distributions from investments in limited liability partnerships ("LLPs") are recognised as they are paid to the Company. Where such items are considered capital in nature they are recognised as capital profits.

ExpensesAll expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the income statement, all expenses have been presented as revenue items except as follows:

- Expenses which are incidental to the acquisition of an investment are deducted from the Capital Account.- Expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment.- Expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated. Investment management fees are allocated 50% to revenue and 50% to capital, in order to reflect the Directors' expected long-term view of the nature of the investment returns of the Company.

TaxationThe tax effects on different items in the Income Statement are allocated between capital and revenue on the same basis as the particular item to which they relate using the Company's effective rate of tax for the accounting period.

Due to the Company's status as a Venture Capital Trust and the continued intention to meet the conditions required to comply with Part 6 of the Income Tax Act 2007, no provision for taxation is required in respect of any realised or unrealised appreciation of the Company's investments.

Deferred taxation is not discounted and is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when the obligations or rights crystallise based on tax rates and law enacted or substantively enacted at the balance sheet date. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the accounts. Deferred tax assets are only recognised if it is expected that future taxable profits will be available to utilise such assets and are recognised on a non-discounted basis.

Cash and cash equivalentsCash and cash equivalents include cash in hand and deposits held at call with banks with an original maturity of three months or less.

Other debtors and other creditorsOther debtors (including accrued income) and other creditors are included within the accounts at amortised cost.

Share issue costsShare issue costs have been deducted from the special reserve account.

Funds held in respect of shares not yet allottedCash received in respect of applications for new shares that have not yet been allotted is shown as "Funds held in respect of shares not yet allotted" and recorded on the Balance Sheet.

Segmental reportingThe Company only has one class of business and one market.

3. Basic and diluted return per share

2017

2016

Return per share based on:

£'000

£'000

Net revenue return for the financial year

(12)

879

Net capital gain for the financial year

2,292

1,713

Total return for the financial year

2,280

2,592

Weighted average number of shares in issue

101,137,288

85,175,415

As the Company has not issued any convertible securities or share options, there is no dilutive effect on return per share. The return per share disclosed therefore represents both the basic and diluted return per share.

4. Principal RisksThe Company's investment activities expose the Company to a number of risks associated with financial instruments and the sectors in which the Company invests. The principal financial risks arising from the Company's operations are:

- Investment risks;- Credit risk; and- Liquidity risk.

The Board regularly reviews these risks and the policies in place for managing them. There have been no significant changes to the nature of the risks that the Company is exposed to over the year and there have also been no significant changes to the policies for managing those risks during the year.

The risk management policies used by the Company in respect of the principal financial risks and a review of the financial instruments held at the year-end, are provided below:

Market risksAs a VCT, the Company is exposed to investment risks in the form of potential losses and gains that may arise on the investments it holds in accordance with its investment policy. The management of these investment risks is a fundamental part of the investment activities undertaken by the Investment Adviser and overseen by the Board. The Investment Adviser monitors investments through regular contact with management of investee companies, regular review of management accounts and other financial information and attendance at investee company board meetings. This enables the Investment Adviser to manage the investment risk in respect of individual investments. Investment risk is also mitigated by holding a diversified portfolio spread across various business sectors and asset classes.

The key investment risks to which the Company is exposed are:

- Investment price risk; and- Interest rate risk.

The Company has undertaken sensitivity analysis on its financial instruments, split into the relevant component parts, taking into consideration the economic climate at the time of review in order to ascertain the appropriate risk allocation.

Investment price riskInvestment price risk arises from uncertainty about the future prices and valuations of financial instruments held in accordance with the Company's investment objectives. It represents the potential loss that the Company might suffer through investment price movements in respect of quoted investments and also changes in the fair value of unquoted investments that it holds.

Interest risk The Company accepts exposure to interest rate risk on floating-rate financial assets through the effect of changes in prevailing interest rates. The Company receives interest on its cash deposits at a rate agreed with its bankers. Investments in loan stock and fixed interest securities attract interest predominately at fixed rates. A summary of the interest rate profile of the Company's investments is shown below.

Interest rate profile of financial assets and financial liabilitiesThere are three levels of interest which are attributable to the financial instruments as follows:

The Company monitors the level of income received from fixed, floating and non interest rate assets and, if appropriate, may make adjustments to the allocation between the categories, in particular, should this be required to ensure compliance with the VCT regulations.

As the Bank of England base rate fell for the first time in seven years by 0.25% to 0.25% per annum it is not believed that a further reduction from this level is likely. Any potential change in the base rate, at the current level, would have an immaterial impact on the net assets and total return of the Company.

Credit riskCredit risk is the risk that the counterparty to a financial instrument is unable to discharge a commitment to the Company made under that instrument. The Company is exposed to credit risk through its holdings of loan stock in investee companies, investments in fixed interest securities, cash deposits and debtors.

The Investment Adviser manages credit risk in respect of loan notes with a similar approach as described under investment risks above. In addition the credit risk is mitigated by registering floating charges, covering the full par value of the loan stock in the form of fixed and floating charges over the assets of the investee companies. The strength of this security in each case is dependent on the nature of the investee company's business and its identifiable assets. The level of security is a key means of managing credit risk. Similarly, the management of credit risk associated with interest, dividends and other receivables is covered within the investment management procedures.

Cash is mainly held at Royal Bank of Scotland plc, with a balance also maintained at Bank of Scotland plc, both of which are A-rated financial institutions and ultimately part-owned by the UK Government. Consequently, the Directors consider that the credit risk associated with cash deposits is low.

There have been no changes in fair value during the year that can be directly attributable to changes in credit risk.

As at 31 March 2017, of the loan stock classified as "past due" below, £9,848,000 relates to the principal of loan notes where, although the principal remains within the term, the investee company is not fully servicing the interest obligations under the loan note and is in arrears. Notwithstanding the arrears of interest, the Directors do not consider that the loan note itself has been impaired or the maturity of the principal has altered.

As at 31 March 2017, of the loan stock classified as "past due" below, £2,101,000 relates to the principal of loan notes where the principal has passed its maturity date. As at the balance sheet date, the extent to which the principal is past its maturity date, £1.4 million falls within the banding of nil to 2 years past due and £0.7 million is 3 to 5 years past due. Notwithstanding this information, the Directors do not consider the loan notes to be impaired at the current time or that maturity dates of the principal have altered.

As at 31 March 2016, of the loan stock classified as "past due" below, £7,585,000 relates to the principal of loan notes where, although the principal remains within term, the investee company is not fully servicing the interest obligations under the loan note and is in arrears. Notwithstanding the arrears of interest, the Directors do not consider that the loan note itself has been impaired or the maturity of the principal has altered.

As at 31 March 2016, of the loan stock classified as "past due" below, £2,605,000 relates to the principal of loan notes where the principal has passed its maturity date. As at the balance sheet date, the extent to which the principal is past its maturity date, £2.1 million falls within the banding of nil to 2 years past due and £0.5 million is 3 to 4 years past due. Notwithstanding this information, the Directors do not consider the loan notes to be impaired at the current time or that the maturity dates of the principals have altered.

Liquidity riskLiquidity risk is the risk that the Company encounters difficulties in meeting obligations associated with its financial liabilities. Liquidity risk may also arise from either the inability to sell financial instruments when required at their fair values or from the inability to generate cash inflows as required. The Company normally has a relatively low level of creditors (2017: £498,000, 2016: £342,000) and has no borrowings. Also most quoted investments held by the Company are considered to be readily realisable. The Company always holds sufficient levels of funds as cash and readily realisable investments in order to meet expenses and other cash outflows as they arise. For these reasons the Board believes that the Company's exposure to liquidity risk is minimal.

The Company's liquidity risk is managed by the Investment Adviser in line with guidance agreed with the Board and is reviewed by the Board at regular intervals.

ANNOUNCEMENT BASED ON AUDITED ACCOUNTS The financial information set out in this announcement does not constitute the Company's statutory financial statements in accordance with section 434 Companies Act 2006 for the year ended 31 March 2017, but has been extracted from the statutory financial statements for the year ended 31 March 2017 which were approved by the Board of Directors on 17 July 2017 and will be delivered to the Registrar of Companies. The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.

The statutory accounts for the year ended 31 March 2016 have been delivered to the Registrar of Companies and received an Independent Auditors report which was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.

A copy of the full annual report and financial statements for the year ended 31 March 2017 will be printed and posted to shareholders shortly. Copies will also be available to the public at the registered office of the Company at Ergon House, Horseferry Road, London SW1P 2AL and will be available for download from and www.downing.co.uk